2015 has seen a ”challenging” year for Petra Diamonds after encountering poor diamond quality mining areas at its Finsch and Cullian mines in South Africa.
As a result, the LSE-listed company has revealed its expects to see a drop in its revenue for 2015 from US$471.8 million in 2014 to $430 million.
This announcement was issued in a trading statement where the JSE-listed diamond miner said it would announce its final year end results (to 30 June 2015) on 27 July 2015.
The company is in a transitional period at present, which has contributed to its poorer diamond quality delivery. The transition is mainly due to:
- underground production at Finsch and Cullinan being sourced from mature and diluted mining areas. This causes variability in both the achieved ROM grade as well as in product mix due to the finer nature of the ore at this late stage in the life cycles of the old block caves; and
- the treatment of high levels of C-Cut project development waste material through the main plant (as there are no separate waste handling facilities at the mine) at Cullinan.
Despite the above, Petra’s production target of ca. 3.2 million carats for the year remains unchanged, due to this variability in product mix (the lower incidence of high quality stones and higher volumes of smaller diamonds reduces the average prices achieved on sale).
The company’s reliance on production from heavily diluted ore will become less of an issue during the course of FY 2016 as the company will see (i) increasing production from less diluted areas and from new mining areas providing access to undiluted ore and (ii) a reduction in waste development tonnes.
Petra’s expansion programmes remain on time at both flagship operations and Petra remains on track to reach its longer-term target of ca. 5 million carats by FY 2019.